Page 1 GAO-06-229R NSF Fiscal Year 2003 Restatements 

United States Government Accountability Office

Washington, DC 20548 

December 22, 2005 

Mr. Thomas N. Cooley 

Chief Financial Officer 

National Science Foundation 

Ms. Christine C. Boesz 

Inspector General 

National Science Foundation 

Subject: Financial Audit: Restatements to the National Science Foundation’s 

Fiscal Year 2003 Financial Statements

As you know, the Secretary of the Treasury, in coordination with the Director of the 

Office of Management and Budget (OMB), is required to annually prepare and submit 

audited financial statements of the U.S. government to the President and Congress. 

We are required to audit these consolidated financial statements (CFS) and report on 

the results of our work.1

 An issue meriting concern and close scrutiny that emerged 

during our fiscal year 2004 CFS audit was the growing number of Chief Financial 

Officers (CFO) Act agencies that restated2

 certain of their financial statements for 

fiscal year 2003 to correct errors.3

 Errors in financial statements can result from 

mathematical mistakes, mistakes in the application of accounting principles, or 

oversight or misuse of facts that existed at the time the financial statements were 

prepared. Frequent restatements to correct errors can undermine public trust and 

confidence in both the entity and all responsible parties. Further, when restatements 

do occur, it is important that financial statements clearly communicate, and readers 

 

1

The Government Management Reform Act of 1994 has required such reporting, covering the executive 

branch of government, beginning with financial statements prepared for fiscal year 1997. 31 U.S.C. § 

331 (e). The federal government has elected to include certain financial information on the legislative 

and judicial branches in the CFS as well. 

2

A financial statement restatement occurs when an entity either voluntarily or prompted by its auditors 

or regulators revises public financial information that has previously been reported. 

3

According to Federal Accounting Standards Advisory Board, Statement of Federal Financial 

Accounting Standards No. 21, Reporting Corrections of Errors and Changes in Accounting 

Principles, prior period financial statements presented should be restated only to correct errors that 

caused such statements to be materially misstated. 
Page 2 GAO-06-229R NSF Fiscal Year 2003 Restatements 

 

of the restated financial statements understand, that the financial statements 

originally issued by management in the previous year and the opinion thereon should 

no longer be relied on and instead the restated financial statements and related 

auditor’s opinion should be used. 

Eleven of the 23 CFO Act agencies4

 restated certain of their financial statements for 

fiscal year 2003. Five CFO Act agencies had restatements in fiscal year 2003 covering 

their fiscal year 2002 financial statements. Three CFO Act agencies had restatements 

covering both years. We noted that the extent of the restatements to CFO Act 

agencies’ fiscal year 2003 financial statements varied from agency to agency, ranging 

from correcting two line items on an agency’s balance sheet to correcting numerous 

line items on several of another agency’s financial statements. In some cases, the net 

operating results of the agency were affected by the restatement. The amounts of the 

agencies’ restatements ranged from several million dollars to more than $91 billion. 

Nine of the 11 agencies that had restatements for fiscal year 2003 received unqualified 

opinions on their originally issued fiscal year 2003 financial statements. The auditors 

for 6 of these 9 agencies issued unqualified opinions on the restated financial 

statements, replacing the previous unqualified opinions on the respective agencies’ 

original fiscal year 2003 financial statements. The auditors for 2 of these 9 withdrew 

their unqualified opinions on the fiscal year 2003 financial statements and issued 

other than unqualified opinions on the respective agencies’ restated fiscal year 2003 

financial statements because they could not determine whether there were any 

additional misstatements and the effect of any such misstatements on the restated 

fiscal year 2003 financial statements. For the remaining agency, the principal auditor 

of the agency’s fiscal year 2004 financial statements was not the principal auditor of 

the agency’s fiscal year 2003 financial statements, and an audit opinion on the 

agency’s restated fiscal year 2003 financial statements was not issued. 

Our review focused on the 9 agencies with restatements for fiscal year 2003 that 

received unqualified opinions on their originally issued fiscal year 2003 financial 

statements.5

 These were the Department of Agriculture, Department of State, 

Department of Justice, Department of Transportation, Department of Health and 

Human Services, General Services Administration, National Science Foundation 

(NSF), Nuclear Regulatory Commission, and Office of Personnel Management. 

4

The Federal Emergency Management Agency (FEMA) was transferred to the Department of 

Homeland Security (DHS) effective March 1, 2003. With this transfer, FEMA was no longer required to 

prepare and have audited stand-alone financial statements under the CFO Act, leaving 23 CFO Act 

agencies for the remainder of fiscal year 2003 and for fiscal year 2004. The DHS Financial 

Accountability Act, Pub. L. No. 108-330, 118 Stat. 1275 (Oct. 16, 2004), added DHS to the list of CFO Act 

agencies, increasing the number of CFO Act agencies again to 24 beginning in fiscal year 2005. 

5

The 2 agencies that had restatements for fiscal year 2003 but did not receive unqualified opinions on 

their originally issued fiscal year 2003 financial statements were the Department of Defense and the 

Small Business Administration. 
Page 3 GAO-06-229R NSF Fiscal Year 2003 Restatements 

 

Because of the varying nature and circumstances surrounding the restatements, we 

are issuing a number of separate reports on the matter. This report communicates 

our observations regarding NSF’s fiscal year 2003 restatements. Going forward, we 

hope that the lessons learned from the fiscal year 2003 restatements, together with 

our recommendations, will help NSF and its auditor avoid the need for restatements 

to NSF’s future financial statements. 

We reviewed four key areas with respect to the restatements of NSF’s fiscal year 2003 

financial statements: (1) the nature and cause of the errors that necessitated the 

restatements, including planned corrective actions by the agency and its auditors; (2) 

the timing of communicating the material misstatement to users of the financial 

statements; (3) the extent of transparency6

 exhibited in disclosing the nature and 

impact of the material misstatement in the financial statements and the reissued 

auditor’s report; and (4) audit issues that contributed to the failure to detect the 

errors that necessitated the restatements during the audit of the agency’s fiscal year 

2003 financial statements. 

Results in Brief

Failure to properly record the H-1B Nonimmigrant Petitioner Fees7

 (H-1B) account 

funds for fiscal years 1999 through 2003 led to the material misstatement of about 

$216 million that necessitated the restatements of NSF’s originally issued fiscal year 

2003 Balance Sheet and Statement of Changes in Net Position. According to the NSF 

contracted independent public accountant’s (IPA) management letter report dated 

November 4, 2004, NSF’s Division of Financial Management (DFM) did not have 

adequate internal controls to ensure that it provided accurate financial data, which 

may have contributed to the recording error that necessitated the restatements. 

NSF’s IPA did not discover the error during its audit of NSF’s fiscal year 2003 

financial statements. In our view, the IPA did not understand that the H-1B account 

funds are special funds, which are to be accounted for differently than certain other 

NSF receipts. In addition, we found that the IPA was not aware of the U.S. 

Department of the Treasury’s Financial Management Service (FMS) guidance relating 

6

Transparency is the full, accurate, and timely disclosure of information. 

7

H-1B account funds are fees collected by the U.S. Treasury from employers that employ highly skilled 

aliens in specialty occupations. The American Competitiveness and Workforce Improvement Act of 

1998, Title IV, states that the federal government shall impose a fee on an employer filing a petition 

relating to granting an alien nonimmigrant status. Fees collected shall be deposited with the 

Department of the Treasury in a separate account, which shall be known as the H-1B Nonimmigrant 

Petitioner Account, and disseminated for a variety of uses – such as job training, low-income 

scholarship program, educational grants, systemic reform activities, duties relating to petitions, and 

application processing and enforcement. 
Page 4 GAO-06-229R NSF Fiscal Year 2003 Restatements 

 

to the recording of H-1B account funds. Consequently, the IPA did not design or 

perform adequate audit procedures to detect the accounting errors. 

We are making a recommendation to NSF’s CFO to address the issues we identified 

with respect to the H-1B account funds recording error that necessitated the fiscal 

year 2003 restatements. We are also making a recommendation to NSF’s Inspector 

General to work with the IPA so that audit procedures to detect any future material 

H-1B account funds recording errors are fully and effectively implemented. 

In commenting on a draft of this report, the NSF’s CFO and Inspector General, in 

separate letters, offered their views regarding the materiality of the errors and the 

impact of the errors on Net Position. We have clarified our perspective on both 

points. The report notes that the recording errors in individual years may not have 

been material, but that the cumulative effect of the errors on the fiscal year 2003 

financial statements was deemed material by NSF’s IPA. We also note that Total Net 

Position was unchanged, but that the two distinct components of net position, were 

misstated. 

 

NSF’s Inspector General concurred with our recommendation and stated that her 

office had instituted procedures to ensure that the IPA designed and performed audit 

steps to detect any future H-1B account fund recording errors. 

Background

In conducting the fiscal year 2004 audit of the CFS, we reviewed the 23 CFO Act 

agencies’ performance and accountability reports for possible restatements and 

identified 11 agencies that had restated certain of their audited fiscal year 2003 

financial statements. 

The primary intended users of federal agencies’ financial reports are citizens, 

Congress, federal executives, and federal program managers.8

 Each of these groups 

may use federal agencies’ financial statements to satisfy their specific needs. Citizens 

are interested in many aspects of the federal government, particularly federal 

programs that affect their financial well-being. Congress is interested in monitoring 

and assessing the efficiency and effectiveness of federal programs. Federal 

executives, such as central agency officials at OMB and the Department of the 

Treasury (Treasury), are interested in federal financial statements to assist the 

President of the United States. OMB assists the President in overseeing the 

preparation of the federal budget by formulating the President’s spending plans, 

evaluating the effectiveness of agency programs, assessing competing funding 

demands among agencies, and setting funding priorities. Treasury assists the 

8

Federal Accounting Standards Advisory Board, Statement of Federal Financial Accounting Concepts 

No. 1, Objectives of Federal Financial Reporting. 
Page 5 GAO-06-229R NSF Fiscal Year 2003 Restatements 

 

President in managing the finances of the federal government and prepares the CFS, 

which is based on audited financial statements prepared by federal agencies. GAO 

audits the CFS and reports on the results of its audit. Finally, federal program 

managers use agency financial statements as tools for managing their operations 

within the limits of the spending authority granted by Congress. 

The primary accounting and auditing standards that apply to restatement disclosures 

by federal entities are the Federal Accounting Standards Advisory Board’s Statement 

of Federal Financial Accounting Standards (SFFAS) No. 21, Reporting Corrections of 

Errors and Changes in Accounting Principles, and the American Institute of 

Certified Public Accountants (AICPA) Codification of Auditing Standards, AU section 

561, Subsequent Discovery of Facts Existing at the Date of the Auditor’s Report.

9

 

Objective, Scope, and Methodology 

The objective of our review of restatements of NSF’s fiscal year 2003 financial 

statements was to determine the nature and cause of the errors, the transparency and 

timing of communicating the material misstatements, any audit issues relating to 

such misstatements, and any actions being taken to help preclude similar errors from 

occurring in the future. 

We reviewed the nature and causes of the restatements, and we also examined 

corrective actions taken by NSF to help preclude similar errors from occurring in the 

future. We interviewed the preparers and auditors of NSF’s fiscal year 2003 financial 

statements, including staff from the agency’s Office of Inspector General (OIG), and 

we obtained and reviewed relevant audit documentation. Our work was not designed 

to and we did not test the accuracy or appropriateness of the restatements. 

In our review, we considered certain accounting and auditing standards, including 

SFFAS No. 21; the Financial Accounting Standards Board’s Statement of Financial 

Accounting Standards No. 16, Prior Period Adjustments; and the AICPA Codification 

of Auditing Standards, AU section 420, Consistency of Application of Generally 

Accepted Accounting Principles, AU section 508, Reports on Audited Financial 

Statements, and AU section 561. 

We performed our review of the restatements of NSF’s fiscal year 2003 financial 

statements from December 2004 to July 2005 in accordance with U.S. generally 

accepted government auditing standards. 

9

Generally accepted government auditing standards incorporate AICPA reporting standards and 

Statements on Auditing Standards unless the Comptroller General of the United States excludes them 

by formal announcement. 
Page 6 GAO-06-229R NSF Fiscal Year 2003 Restatements 

We requested comments on the draft of this report from NSF’s CFO and Inspector 

General or their designees. Written comments from NSF’s CFO and Inspector General 

are reprinted in Enclosures I and II, respectively, and are also discussed in the 

“Agency Comments and Our Evaluation” section. We also received technical 

comments from NSF’s Inspector General which we have incorporated as appropriate 

but have not reprinted in Enclosure II. 

Issues Related to Restatements of Certain of NSF’s Fiscal Year 2003 

Financial Statements 

With respect to the restatements of NSF’s fiscal year 2003 Balance Sheet and 

Statement of Changes in Net Position, we identified the following two areas that need 

improvement: (1) accounting for and reporting of the H-1B account funds; and (2) 

audit procedures over the proper recording of H-1B account funds. These issues are 

discussed in detail below. 

H-1B Account Funds Were Not Properly Recorded 

In fiscal year 2004, NSF restated certain of its originally issued fiscal year 2003 

financial statements to correct for the improper recording of approximately $216 

million of H-1B account funds for fiscal years 1999 through 2003. Specifically, the H1B account funds were incorrectly recorded as Other Appropriations Realized when 

received instead of Appropriated Trust or Special Fund Receipts. The recording 

errors caused the Unexpended Appropriations and Cumulative Results of 

Operations balances on both the originally issued fiscal year 2003 Balance Sheet and 

Statement of Changes in Net Position to be materially overstated and understated, 

respectively, by $216 million. Although Total Net Position was unchanged, these two 

accounts represent distinct components of net position. In addition, the recording 

errors in individual years may not have been material, however, the cumulative effect 

of the errors on the fiscal year 2003 financial statements was deemed material by 

NSF’s IPA. 

In February 1999, FMS issued guidance entitled Unavailable Special Fund Receipt 

Account Transfers that provided definitions and descriptive journal entries for 

recording special funds in accordance with SFFAS No. 7, Accounting for Revenue 

and Other Financing Sources and Concepts for Reconciling Budgetary and 

Financial Accounting. The H-1B account funds are NSF’s only appropriations that 

are classified as special funds. NSF incorrectly recorded the H-1B account funds as 

Other Appropriations Realized instead of Appropriated Trust or Special Fund 

Receipts because NSF was not aware of the February 1999 FMS guidance, and as a 

result, NSF was not aware that such funds were recorded in error. An NSF official 

told us that they believed, until fiscal year 2004, that they were appropriately 

recording the receipt of the H-1B account funds. 
Page 7 GAO-06-229R NSF Fiscal Year 2003 Restatements 

In July 2004, OMB sent an email following up on a March 2004 notification to NSF 

staff personnel that the H-1B account funds were incorrectly recorded and that NSF 

was required to follow the related FMS guidance.10 NSF staff personnel corrected 

NSF’s error approximately 8 months after the agency was first notified. However, 

according to NSF officials, NSF management did not become aware of the magnitude 

of the misstatement until October 2004. Further, the IPA and OIG stated that they 

were unaware of the H-1B account funds recording error until NSF provided them a 

draft of the fiscal years 2004 and 2003 comparative financial statements in October 

2004 that contained the restatements to the fiscal year 2003 financial statements. 

According to the NSF IPA’s management letter report dated November 4, 2004, NSF’s 

DFM did not have adequate internal controls to ensure that it provided accurate 

financial data. The IPA stated that this may have contributed to the recording errors 

that necessitated the restatements. The IPA’s report pointed out that first and second 

drafts of the comparative fiscal years 2004 and 2003 financial statements provided by 

DFM contained numerous errors. 

To resolve this matter, the IPA generally recommended that NSF’s Chief Financial 

Officer determine the appropriate skills and abilities needed in the DFM 

organizational structure to fulfill NSF’s responsibilities for providing accurate 

financial data, and implement steps to improve top level supervisory review 

procedures and practices. 

 

NSF management responded to the IPA’s recommendations stating that they believed 

that normal supervisory controls were in place and that such controls provide the 

review procedures and practices recommended by the IPA. Nevertheless, NSF 

management stated that the IPA’s recommendations would be incorporated in NSF’s 

annual performance review process. In addition, subsequent to the IPA making its 

recommendations, NSF filled the office of deputy CFO position which had been 

vacant for 18 months. According to the IPA, this action will provide better oversight 

of NSF’s financial reporting process. 

 

Audit Procedures were Not Adequately Designed to Detect the Improper Recording 

of H-1B Account Funds

The above noted material error was not discovered during the audit of NSF’s fiscal 

year 2003 financial statements. In our view, the IPA did not understand that the H-1B 

account funds are special funds, which are to be accounted for differently than 

certain other NSF receipts. In addition, we found that the IPA was not aware of the 

 

10According to OMB’s e-mail correspondence dated July 6, 2004, to NSF staff personnel, if the error was 

not corrected, then the special and trust fund budget authority recorded in NSF’s H-1B account funds 

will not crosswalk into the agency’s actual columns of the Program and Financing Schedule in the 

fiscal year 2006 [President’s] Budget. 
Page 8 GAO-06-229R NSF Fiscal Year 2003 Restatements 

 

1999 FMS guidance relating to the recording of H-1B account funds. Consequently, 

the IPA did not design or perform adequate audit procedures to detect the errors. 

According to the Financial Audit Manual (FAM),11 the auditor should perform audit 

procedures to test for all significant assertions12 in significant financial statement line 

items and accounts. The FAM states that an assertion is significant if misstatements 

in the assertion could exceed test materiality for the related line item, account, or 

disclosure. Based on the materiality of NSF’s H-1B account funds recording error, the 

auditor should have identified the presentation and disclosure assertion as significant 

and performed audit procedures to determine whether NSF’s receipts, annually and 

in the aggregate, were properly reported in the financial statements. To test for 

presentation and disclosure, the auditor should perform audit procedures to 

determine whether (1) accounts are properly classified and described in the financial 

statements, (2) the financial statements are prepared in conformance with generally 

accepted accounting principles, and (3) footnotes contain all information required to 

be disclosed. The IPA performed certain audit procedures during fiscal year 2003 to 

test budget accounts. However, because the IPA (1) did not understand that the H-1B 

account funds are special funds, which are to be accounted for differently than 

certain other NSF receipts, and (2) was not aware of the 1999 FMS guidance relating 

to the recording of H-1B account funds, the IPA did not design or perform audit 

procedures to adequately test for the presentation and disclosure assertion as it 

related to the H-1B account funds. 

According to NSF’s IPA, it has now obtained and reviewed the February 1999 FMS 

guidance. The IPA also stated that, beginning with fiscal year 2005, audit procedures 

will be designed and performed to detect any future H-1B account funds recording 

errors. 

Conclusions 

NSF restated certain of its originally issued fiscal year 2003 financial statements and 

disclosed the material error in the notes to the restated financial statements. Going 

forward, the key will be for NSF to fully and effectively implement policies and 

procedures to help ensure that H-1B account funds are properly recorded. It will also 

be important for NSF’s auditor to fully and effectively implement audit procedures to 

detect any H-1B account funds recording errors that occur in the future. 

11GAO/President’s Council on Integrity and Efficiency, Financial Audit Manual, GAO-01-765G 

(Washington, D.C.: July 2001), updated by GAO-04-1015G and GAO-04-942G (July 2004). 

12Financial statement assertions are management representations that are embodied in financial 

statement components. The assertions can be either explicit or implicit and can be classified into the 

following categories: (1) existence or occurrence, (2) completeness, (3) rights and obligations, (4) 

valuation or allocation, and (5) presentation and disclosure. 
Page 9 GAO-06-229R NSF Fiscal Year 2003 Restatements 

Recommendations for Executive Action 

We recommend that NSF’s Chief Financial Officer ensure that NSF fully and 

effectively implements policies and procedures to properly record H-1B account 

funds. 

We recommend that NSF’s Inspector General work with NSF’s IPA so that audit 

procedures to detect any future material H-1B account funds recording errors are 

fully and effectively implemented. 

Agency Comments and Our Evaluation 

In commenting on a draft of this report, NSF’s CFO and Inspector General, in 

separate letters, offered their views regarding the materiality of the errors and the 

impact of the errors on Net Position. We have clarified our perspective on both 

points. Our report makes clear that there was no effect on NSF’s Total Net Position 

and that the cumulative effect of the continuing recording errors for fiscal years 1999 

through 2003 caused the Unexpended Appropriations and Cumulative Results of 

Operations balances on both the originally issued fiscal year 2003 Balance Sheet and 

Statement of Changes in Net Position to be materially overstated and understated, 

respectively. The component accounts making up the Statement of Changes in Net 

Position became increasingly overstated and understated each year until the 

accounting treatment was corrected for the entire 5-year period in the restated fiscal 

year 2003 financial statements. To provide more context for this improper accounting 

and subsequent restatements, we have added language to our report stating that in 

any 1 year, the recording error of H-1B account fund receipts may not have been 

material, but that the cumulative effect of the errors on the fiscal year 2003 Balance 

Sheet and Statement of Changes in Net Position was deemed material by NSF’s IPA. 

NSF’s CFO also stated that OMB’s March 2004 notification of the accounting error 

and need to follow the previously issued 1999 FMS guidance was communicated at 

the staff level and not formally through the CFO or the deputy CFO, which caused 

management delays in ensuring the appropriate level of attention to the issue. In our 

view, agency financial managers should have been aware of and implemented the 

new accounting guidance in 1999 when it was first issued by FMS, which would have 

avoided the need for the fiscal year 2003 restatements. 

NSF’s CFO further stated that the IPA’s management letter findings that we reported 

had no actual bearing on the facts of the restatements and that NSF’s management 

response to the IPA findings should be reflected for proper balance and context. As 

we noted in this report, NSF’s IPA reported in a finding dealing with financial 

management practices that NSF did not have adequate internal controls to ensure 

that it provided accurate financial data which may have contributed to the recording 
Page 10 GAO-06-229R NSF Fiscal Year 2003 Restatements 

error that necessitated the restatements. To resolve this matter, the IPA generally 

recommended that NSF’s Chief Financial Officer determine the appropriate skills and 

abilities needed in the DFM organizational structure to fulfill NSF’s responsibilities 

for providing accurate financial data and implement steps to improve top level 

supervisory review procedures and practices. NSF management responded to the 

IPA’s recommendations stating that they believed that normal supervisory controls 

were in place and that such controls provide the review procedures and practices 

recommended by the IPA. Nevertheless, NSF management stated that the IPA’s 

recommendations would be incorporated in NSF’s annual performance review 

process. It should be noted that, in providing its perspective on the IPA-identified 

issue and management’s response, the OIG said the errors in NSF’s financial 

statements and the untimely notification of the need to restate NSF’s fiscal year 2003 

financial statements demonstrated that management’s controls over financial 

reporting were not adequate or appropriate. 

Finally, NSF’s Inspector General concurred with our recommendation and stated that 

her office had instituted procedures to ensure that the IPA designed and performed 

audit steps to detect any H-1B account fund recording errors. We also received 

technical comments from NSF’s Inspector General which we have incorporated as 

appropriate. 

- - - - - 

Within 60 days of the date of this report, we would appreciate receiving a written 

statement on actions taken to address these recommendations. 

We are sending copies of this report to the Chairmen and Ranking Minority Members 

of the Senate Committee on Homeland Security and Governmental Affairs; the 

Subcommittee on Federal Financial Management, Government Information, and 

International Security, Senate Committee on Homeland Security and Governmental 

Affairs; the House Committee on Government Reform; and the Subcommittee on 

Government Management, Finance and Accountability, House Committee on 

Government Reform. In addition, we are sending copies to the Fiscal Assistant 

Secretary of the Treasury and the Controller of OMB. This report is also available at 

no charge on GAO’s Web site at www.gao.gov. 
Page 11 GAO-06-229R NSF Fiscal Year 2003 Restatements 

We appreciate the courtesy and cooperation extended to us by your staff throughout 

our work. We look forward to continuing to work with your offices to help improve 

financial management in the federal government. If you have any questions about the 

contents of this report, please contact me at (202) 512-3406 or engelg@gao.gov. 

Gary T. Engel 

Director 

Financial Management and Assurance 
Page 12 GAO-06-229R NSF Fiscal Year 2003 Restatements 

Enclosure I: Comments from the Chief Financial Officer, National Science 

Foundation 

Note: GAO comments 

supplementing those 

in the report text 

appear at the end of 

this enclosure. 

See comment 1.

See comment 1.

See comment 2.
Page 13 GAO-06-229R NSF Fiscal Year 2003 Restatements 

See comment 1.
Page 14 GAO-06-229R NSF Fiscal Year 2003 Restatements 

The following are GAO’s comments on the November 30, 2005, letter from the 

National Science Foundation’s, Chief Financial Officer. 

GAO Comments 

1. See “Agency Comments and Our Evaluation” section. 

 

2. It would be inappropriate to categorize the correction for a material error 

in NSF’s financial statements as merely a reclassification. Although Total 

Net Position was unchanged, these two accounts represent distinct 

components of net position. Specifically, according to Statements of 

Federal Financial Accounting Concepts No. 2, Entity and Display, 

Cumulative Results of Operations generally includes the amounts 

accumulated over the years by an entity from its financing sources less its 

expenses and losses, while Unexpended Appropriations represents 

appropriations not yet obligated or expended, including undelivered 

orders. 

Further, IPA officials told us that they considered the error to be material 

and concluded that NSF needed to restate the fiscal year 2003 financial 

statements and disclose in the comparative fiscal years 2004 and 2003 

financial statements that certain fiscal year 2003 balances have been 

restated. The IPA’s audit report states that NSF’s fiscal year 2003 Balance 

Sheet and Statement of Changes in Net Position were restated. In addition, 

the notes to NSF’s comparative fiscal years 2004 and 2003 financial 

statements includes a note disclosure titled “Restatement” that discusses 

the restatements. 
Page 15 GAO-06-229R NSF Fiscal Year 2003 Restatements 

Enclosure II: Comments from the Inspector General, National Science Foundation 

Note: GAO comments 

supplementing those 

in the report text 

appear at the end of 

this enclosure. 

See comments 1 

and 2.

See comments 1 

and 2.
Page 16 GAO-06-229R NSF Fiscal Year 2003 Restatements 

See comment 3.

See comments 1 

and 2.
Page 17 GAO-06-229R NSF Fiscal Year 2003 Restatements 

The following are GAO’s comments on the November 30, 2005, letter from the 

National Science Foundation’s Inspector General. 

GAO Comments 

1. See “Agency Comments and Our Evaluation” section. 

 

2. See GAO comment 2 in Enclosure I. 

 

3. We have clarified this point in our report by modifying the language to state 

that in our view, the IPA did not understand that the H-1B account funds 

are special funds, which are to be accounted for differently than certain 

other NSF receipts. 

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